Boeing will suspend production of the 737 Max in January amid the continued grounding of the narrowbody into next year, the company confirmed after the close of the New York Stock Exchange on December 16, noting that the reduced output would allow it to prioritize delivery of the some 400 aircraft now in storage. The decision came less than a week after FAA Administrator Stephen Dickson said the certification process would extend into next year, an eventuality about which Boeing CEO Dennis Muilenburg warned during the company’s third-quarter earnings call could result in a halt or significant slowdown of production.
While testifying before the House of Representatives Transportation Committee on December 11, Dickson said that authorities must meet a number of milestones before allowing the airplane to fly in service again, including a certification flight test and completion of work by the joint operations evaluation board involving evaluation of pilot training needs.
Boeing said the grounding would not result in any layoffs at its narrowbody plant in Renton, Washington, and that it would reassign employees to other sites in the Puget Sound region. “As we have throughout the 737 Max grounding, we will keep our customers, employees, and supply chain top of mind as we continue to assess appropriate actions,” said Boeing in a statement. “This will include efforts to sustain the gains in production system and supply chain quality and health made over the last many months.”
The company called the decision the “least disruptive” option to maintaining long-term production systems and supply chain health. Along with the extension of certification into 2020, factors that led to the move include uncertainty about the timing and conditions of return to service and global training approvals “and the importance of ensuring that we can prioritize the delivery of stored aircraft,” added the company.
While the planned suspension of the 737 Max production line will certainly preserve cash for Boeing, it will also send ripples through a supplier network populated with companies ranging from subassembly makers to fastener manufacturers. Few have said with any certainty to what extent they expect the shutdown to affect their operations and bottom lines, however.
Some of the higher-profile companies such as fuselage supplier Spirit Aerosystems and the two members of the CFM engine partnership have in past financial statements reported on the effects they have already felt since the Max’s grounding in March. Neither Spirit nor CFM, however, would talk about what contingency plans they and Boeing have formulated in the event of a complete line shutdown in Renton, Washington.
“Following Boeing's decision to temporarily suspend production on the 737 Max program from January 2020, CFM is working closely with its suppliers and partners to assess this new situation and its consequences,” said CFM in a statement.
For its part, Spirit issued a similarly opaque statement. "Following the announcement from Boeing that they will temporarily halt production of the 737 MAX, we are working closely with our customer to determine what that means for Spirit,” it said. “As decisions are made on how to best mitigate this additional impact, we will communicate any new information to employees and other stakeholders."